UBS announced Monday it had finalised the takeover of its former rival Credit Suisse, clearing the way for the Herculean task of integrating two of the world’s most important banks.
The mega-merger of the biggest banks in Switzerland will be closely watched by clients, employees, politicians and regulators.
“UBS has completed the acquisition of Credit Suisse today, crossing an important milestone,” the bank said in a statement.
“Credit Suisse Group AG has been merged into UBS Group AG and the combined entity will operate as a consolidated banking group.”
UBS, Switzerland’s leading bank, was forced into the marriage on March 19 to prevent its closest domestic rival from going under — with potentially catastrophic consequences for the global financial system.
“I’m pleased that we’ve successfully closed this crucial transaction in less than three months, bringing together two global systemically important banks for the first time,” said UBS chairman Colm Kelleher.
“We are now one Swiss global firm and, together, we are stronger… Our top priority remains the same: to serve our clients with excellence.”
– No other option –
The merger will be complex both technically and politically, resulting in a megabank bigger than anything Switzerland has seen before — a size that has political leaders worried.
Thousands of jobs could be lost due to overlapping operations.
To Thomas Jordan, chairman of Switzerland’s central bank, there was no other solution.
“Of course, it’s a pity there is only one (big bank) left. But I am sure that if the takeover by UBS hadn’t succeeded, there would have been an international financial crisis,” the Swiss National Bank chief told the Sonntagszeitung weekly newspaper.
UBS chief executive Sergio Ermotti said Monday that “instead of competing, we’ll now unite as we embark on the next chapter of our joint journey. Together, we’ll present our clients an enhanced global offering, broader geographic reach and access to even greater expertise.”
But he warned Friday that the coming months are likely to be “bumpy”, saying the operation would require “waves” of difficult decisions, particularly regarding employment.
At the end of 2022, the two giants had around 120,000 employees worldwide, including 37,000 in Switzerland.
– Proactive phase –
For the time being, the two banks will continue to operate separately under the UBS umbrella. But UBS has already created a new board of directors for certain Credit Suisse operations, headed by current UBS vice-chairman Lukas Gaehwiler.
UBS has spent the time since March 19 working out a plan of action for absorbing Credit Suisse.
UBS probably already has an idea of what it wants to keep, close or sell, but had been “limited in what they could do” until the merger was sealed, Andreas Venditti, an analyst at Swiss investment manager Vontobel, told AFP.
“From Monday onward, UBS can start to be proactive.”
Credit Suisse risked collapse when its share prices plunged more than 30 percent during trading on March 15, after three US regional lenders folded.
The Swiss government, the central bank and the financial regulators FINMA stepped in and strongarmed UBS into a $3.25 billion takeover announced on March 19.
The deal includes guarantees for UBS in case there are any nasty surprises in the Credit Suisse cupboards, and liquidity to facilitate the takeover.
– ‘Clarity and stability’ –
Many questions surrounding the merger remain unanswered, but Venditti said the picture should be clearer after second-quarter financial results emerge.
UBS has pushed the publication date back by more than a month to August 31.
FINMA said the merger completion “marks the end of a phase of great uncertainty” and “creates clarity and stability”.
“FINMA welcomes UBS’s strategic focus, which foresees a rapid reduction of risk in investment banking,” it said in a statement, referring to the most troubled part of Credit Suisse’s operations.
UBS expects its CET1 capital ratio, which compares a bank’s capital to its risk-weighted assets, to be around 14 percent in the second quarter of 2023.
Monday marks the last trading day for Credit Suisse shares on the Swiss stock exchange. Shareholders will receive one UBS share for every 22.48 Credit Suisse shares.